n Stellenbosch Law Review = Stellenbosch Regstydskrif - Factors relevant to the assessment of the unfairness or unreasonableness of contract terms : some guidance from the German law on standard contract terms

Abstract

Section 52(2) of the Consumer Protection Act, 68 of 2008 ("CPA") lists factors that courts "must" consider when applying section 48, the prohibition of unfair contract terms. Section 52(2) could be improved, inter alia as it does not contain sufficient guidance about the substantive fairness of contract terms. Several other factors, not currently listed in section 52(2), have crystallised in German case law and academic commentaries on § 307(1) of the German Civil Code, which essentially provides that "provisions in standard business terms are ineffective if contrary to the requirement of good faith, they unreasonably disadvantage the other party to the contract with the user." Although the scope of application of § 307(1) is different from that of section 48, the German case law and academic commentary are useful as most terms in consumer contracts are not negotiated anyway. German courts identify and weigh the interests of both parties in the light of the principles of proportionality and necessity. The degree to which the term differs from what the law would be in its absence is an important factor. In relation to contract terms governing risk allocation, the main questions asked are in whose sphere the risk is likely to arise and which party is in a better position to avoid the risk and to insure against it. Conformity with established standards in the sector is also a relevant factor, although its application is qualified. The other terms of the contract or of another contract on which it is dependent are also relevant. Principles that are more specific have developed in German law in respect of the possibility that other terms may increase or decrease the suspicion against a clause. Material inequality between the parties is also a relevant factor, which the South African Law Commission has formulated as whether there is a lack of reciprocity in an otherwise reciprocal contract. The article also lists further factors set out in the EC Directive.